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This presentation includes "forward-looking information", within the meaning of applicable Canadian securities laws, and "forward-looking statements", within the meaning of applicable United States securities laws, including the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as "forward-looking statements"). All forward-looking statements are based on our beliefs as well as assumptions based on information available at the time the assumption was made and on management's experience and perception of historical trends, current conditions, results and expected future developments, as well as other factors deemed appropriate in the circumstances. Forward-looking statements are not facts, but only predictions and generally can be identified by the use of statements that include phrases such as "may", "will", "can"; "could", "would", "shall", "believe", "expect", "estimate", "anticipate", "intend", "plan", "forecast" "foresee", "potential", "enable", "continue" or other comparable terminology. These statements are not guarantees of our future performance, events or results and are subject to a number of significant risks, uncertainties and other important factors that could cause our actual performance, events or results to be materially different from that set out in the forward-looking statements. In particular, this presentation contains forward-looking statements including, but not limited to, statements relating to: the Company’s strategies,
- ngoing objectives and outlook for 2019 and subsequent periods, including being a low-cost generator and ability to participate in growth; relationship with TransAlta Renewables, including the annual receipt of
approximately $150 million in dividends and either reinvesting such dividends in high returning projects or returning capital to shareholders; decreases in emissions and the extent thereof; forecasted Alberta energy and AECO natural gas pricing; Alberta’s expected market fundamentals, including load growth and capacity requirements; future Alberta energy pricing; expected reductions to TransAlta’s marginal cost; market design and carbon policy in the various jurisdictions, including the Technology Innovation and Emissions Reduction program in Alberta, the $30/tonne of CO2E pricing, and receipt of credits for renewable generation; the continuation and realization of future benefits from Project Greenlight; the brownfield investments in the Alberta fleet and expected returns; increase in cash flows from Alberta Hydro following 2020; contract extensions; benefits and returns expected to be realized from the coal-to-gas conversion strategy, including significant reduction in emissions costs, operating costs and outage times; execution of the base conversion plan, including the timing of conversions, ability to secure gas supply, the anticipated capital costs and receipt of regulatory approvals; extension of asset lives as a result of conversions; returns from repowering units and EBITDA potential; U.S. market trends in installed generation; existing growth projects, including the timing of commercial operation, capital invested and expected unlevered returns; acquisition of the 49% interest in the Skookumchuck wind farm; EBITDA from the Company’s growth projects; dividend levels and the payment of dividends equal to 10% to 15% of deconsolidated funds from operations; capital allocation, including as it pertains to dividends, sustaining and productivity capital, growth, conversions, debt reduction and share buybacks; expected reduction in senior recourse debt; post-Hydro PPA debt/EBITDA metrics; sources and uses and funding requirements in 2020 to 2023, including ability to refinance 2022 debt; funding plan of TransAlta Renewables; and any uplift to be realized in Company’s current share price. The forward-looking statements contained in this presentation are based on many assumptions including, but not limited to, the following material assumptions: no significant changes to applicable laws in the markets in which we operate; assumptions referenced in our 2019 guidance; our Alberta hydro assets achieving their anticipated value, cash flows and EBITDA once the applicable power purchase arrangements have expired; no material decline in the dividends expected to be received from TransAlta Renewables Inc.; the expected life extension of the coal fleet and anticipated financial results generated on conversion; the construction by Suncor of approximately 800 MW of cogeneration in Alberta; assumptions regarding the ability of the converted units to successfully compete in the expected Alberta energy-only market; and assumptions regarding our current strategy and priorities, including as it pertains to our coal-to-gas conversions. The material assumptions used in the preparation of the forward-looking statements contained herein, which may prove to be incorrect, include, but are not limited to, the assumptions set forth herein and in management's discussion and analysis (“MD&A”) and the Company's Annual Information Form dated as of February 26, 2019. By their nature, forward-looking statements are not guarantees of future performance, events, results or actions and are subject to a number of significant risks, uncertainties, assumptions and factors that could cause
- ur actual plans, performance, results or outcomes to differ materially from the forward-looking statement. Factors that may adversely impact what is expressed or implied by forward-looking statements contained in
this presentation include, but are not limited to, risks relating to: the failure of the second tranche of the Brookfield investment to close; the outcomes of existing or potential legal actions or regulatory proceedings not being as anticipated, including those pertaining to the Brookfield investment and the South Hedland power station; changes in our relationships with Brookfield and its affiliated entities or our other shareholders; our Alberta hydro assets not achieving their anticipated value, cash flows or adjusted EBITDA; the inability to complete share buy-backs within the timeline or on the terms anticipated or at all; fluctuations in demand, market prices and the availability of fuel supplies required to generate electricity; changes in the current or anticipated legislative, regulatory and political environments in the jurisdictions in which we operate; environmental requirements and changes in, or liabilities under, these requirements; operational risks involving our facilities; changes in market prices where we operate; unplanned outages at generating facilities and the capital investments required; equipment failure and our ability to carry out repairs in a cost effective and timely manner; delays in construction and/or cost overruns; the effects of weather; disruptions in the source
- f fuels, water or wind required to operate our facilities; energy trading risks; failure to obtain necessary regulatory approvals in a timely fashion; negative impact to our credit ratings; legislative or regulatory
developments and their impacts; increasingly stringent environmental requirements and their impacts; increased competition; global capital markets activity (including our ability to access financing at a reasonable cost); changes in prevailing interest rates; currency exchange rates; inflation levels and commodity prices; general economic conditions in the geographic areas where TransAlta operates; and other risks and uncertainties discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time and as also set forth in the Company's MD&A and Annual Information Form for the year ended December 31, 2018. Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on them, which reflect the Company's expectations only as of the date hereof. The forward-looking statements included in this presentation are made only as of the date hereof and we do not undertake to publicly update these forward-looking statements to reflect new information, future events or otherwise, except as required by applicable laws. In light of these risks, uncertainties and assumptions, the forward-looking statements might occur to a different extent or at a different time than we have described or might not occur at all. We cannot assure that projected results or events will be achieved. Certain financial information contained in this presentation, including EBITDA, FFO and FCF, on a consolidated or deconsolidated basis, are not standard measures defined under International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other entities. TransAlta’s deconsolidated FFO is a non-IFRS measure and can be reconciled to TransAlta’s reported 2018 cash flow from operating activities ($820 million) by: (A) adding back changes in non-operating working capital balances ($44 million), adding back decreases in finance lease receivables and other ($59 million and $4 million), and subtracting $157 million for the Sundance B and C PPA termination (for funds from operations of $770 million); (B) subtracting distributions paid to Canadian Power Holdings ($86 million); (C) removing TransAlta Renewables’ 2018 FFO, calculated as TransAlta Renewables’ cash flow from operating activities ($385 million) plus changes in non-operating working capital balances ($5 million), less finance and interest income ($171 million), plus AFFO from economic interests ($162 million) (for TransAlta Renewables’ FFO of $381 million); and (D) plus the dividends received from TransAlta Renewables in 2018 ($151 million). These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Presenting these items from period to period provides management and investors with the ability to evaluate earnings and cash flow trends more readily in comparison with prior periods’ results and, in the case of the deconsolidated FFO and Debt/EBITDA, it allows shareholders to understand how the dividend at TransAlta Renewables is being either returned or invested for TransAlta shareholders. For further information on non-IFRS financial measures we use, see our most recently filed MD&A, filed with Canadian securities regulators on www.sedar.com and the Securities and Exchange Commission on www.edgar.com.